The First Neoliberals

How free-market disciples and union busters became the prophets of American liberalism.

On Tuesday, New York magazine’s Jonathan Chait tweeted, “What if every use of ‘neoliberal’ was replaced with, simply, ‘liberal’? Would any non-propagandistic meaning be lost?”

It was an odd tweet.

On the one hand, Chait was probably just voicing his disgruntlement with an epithet that leftists and Sanders liberals often hurl against Clinton liberals like Chait.

On the other hand, there was a time, not so long ago, when journalists like Chait would have proudly owned the term neoliberal as an apt description of their beliefs. It was the New Republic, after all, the magazine where Chait made his name, that, along with the Washington Monthly, first provided neoliberalism with a home and a face.

Now, neoliberalism, of course, can mean a great many things, many of them associated with the Right. But one of its meanings — arguably, in the United States, the most historically accurate — is the name that a small group of journalists, intellectuals, and politicians on the Left gave to themselves in the late 1970s in order to register their distance from the traditional liberalism of the New Deal and the Great Society.

The original neoliberals included, among others, Michael Kinsley, Charles Peters, James Fallows, Nicholas Lemann, Bill Bradley, Bruce Babbitt, Gary Hart, and Paul Tsongas. Sometimes called “Atari Democrats,” these were the men — and they were almost all men — who helped to remake American liberalism into neoliberalism, culminating in the election of Bill Clinton in 1992.

These were the men who made Jonathan Chait what he is today. Chait, after all, would recoil in horror at the policies and programs of mid-century liberals like Walter Reuther or John Kenneth Galbraith or even Arthur Schlesinger, who claimed that “class conflict is essential if freedom is to be preserved, because it is the only barrier against class domination.” We know this because he so resolutely opposes the more tepid versions of that liberalism that we see in the Sanders campaign.

It’s precisely the distance between that lost world of twentieth century American labor-liberalism and contemporary liberals like Chait that the phrase “neoliberalism” is meant, in part, to register.

We can see that distance first declared, and declared most clearly, in Charles Peters’s famous “A Neoliberal’s Manifesto,” which Tim Barker reminded me of last night. Peters was the founder and editor of the Washington Monthly, and in many ways the éminence grise of the neoliberal movement.

In re-reading Peters’s manifesto — I remember reading it in high school; that was the kind of thing a certain kind of nerdy liberal-ish sophomore might do — I’m struck by how much it sets out the lineaments of Chait-style thinking today.

The basic orientation is announced in the opening paragraph:

We still believe in liberty and justice for all, in mercy for the afflicted and help for the down and out. But we no longer automatically favor unions and big government or oppose the military and big business. Indeed, in our search for solutions that work, we have to distrust all automatic responses, liberal or conservative.

Note the disavowal of all conventional ideologies and beliefs, the affirmation of an open-minded pragmatism guided solely by a bracing commitment to what works. It’s a leitmotif of the entire manifesto: everyone else is blinded by their emotional attachments to the ideas of the past.

We, the heroic few, are willing to look upon reality as it is, to take up solutions from any side of the political spectrum, to disavow anything that smacks of ideological rigidity or partisan tribalism.

That Peters wound up embracing solutions in the piece that put him comfortably within the camp of GOP conservatism (he even makes a sop to school prayer) never seemed to disturb his serenity as a self-identified iconoclast. That was part of the neoliberal esprit de corps: a self-styled philosophical promiscuity married to a fairly conventional ideological fidelity.

Listen to how former New Republic owner Marty Peretz described that ethos in his look-back on the New Republic of the 1970s and 1980s:

My then-wife and I bought the New Republic in 1974. I was at the time a junior faculty member at Harvard, and I installed a former student, Michael Kinsley, as its editor. We put out a magazine that was intellectually daring, I like to think, and politically controversial.

We were for the Contras in Nicaragua; wary of affirmative action; for military intervention in Bosnia, Rwanda and Darfur; alarmed about the decline of the family. The New Republic was also an early proponent of gay rights. We were neoliberals. We were also Zionists, and it was our defense of the Jewish state that put us outside the comfort zone of modern progressive politics.

Except for gay rights and one or two items in that grab bag of foreign interventions, what is Peretz saying here beyond the fact that his politics consisted mainly of supporting various planks from the Republican Party platform? That was the intellectual daring, apparently.

Returning to that first paragraph of Peters’s piece, we find the basic positions of the neoliberal persuasion: opposition to unions and big government, support for the military and big business.

Above all, neoliberals loathed unions, especially teachers unions. They still do, except insofar as they’re useful funding devices for the contemporary Democratic Party.

But reading Peters, it’s clear that unions were, from the very beginning, the main target. The problems with unions were many: they protected their members’ interests (no mention of how important unions were to getting and protecting Social Security and Medicare); they drove up costs, both in the private and the public sector; they defended lazy, incompetent workers (“we want a government that can fire people who can’t or won’t do the job”).

Against unions, or conventional unions, Peters held out the promise of employee stock-ownership plans (ESOPs), where workers would forgo higher wages and benefits in return for stock options and ownership. He happily pointed to the example of Weirton Steel:

. . . where the workers accepted a 32 percent wage cut to keep their company alive. They will not be suckers because they will own the plant and share in the future profits their sacrifice makes possible. It’s better for a worker to keep a job by accepting $12 an hour than to lose it by insisting on $19.

(Sadly, within two decades, Weirton Steel was dead, and with it, those future profits and wages for which those workers had sacrificed in the early 1980s.)

But above all, Peters and other neoliberals saw unions as the instruments of the most vile subjugation of the most downtrodden members of society:

A poor black child might have a better chance of escaping the ghetto if we fired his incompetent middle-class teacher . . .

The urban public schools have in fact become the principal instrument of class oppression in America, keeping the lower orders in their place while the upper class sends its children to private schools.

And here we see how in utero how the neoliberal argument works its magic on the Left.

On the one hand, Peters showed how much the neoliberal was indebted to the Great Society ethos of the 1960s. That ethos was a departure from the New Deal insofar as it proclaimed its solidarity with the most desperate and the most needy.

Michael Harrington’s The Other America, for example, treated the poor not as a central part of the political economy, as the New Deal did. The poor were superfluous to that economy: there was America, which was middle-class and mainstream; there was the “other,” which was poor and marginal. The Great Society declared a War on Poverty, which was thought to be a project different from managing and regulating the economy.

On the other hand, Peters showed how potent, and potently disabling, that kind of thinking could be. In the hands of neoliberalism, it became fashionable to pit the interests of the poor not against the power of the wealthy but against the unionized working class.

(We still see that kind of talk among today’s Democrats, particularly in debates around free trade, where it is always the unionized worker — never the well-paid journalist or economist or corporate CEO — who is expected to make sacrifices on behalf of the global poor. Or among Hillary Clinton supporters, who leverage the interests of African American voters against the interests of white working-class voters, but never against the interests of capital.)

Teachers unions in the inner cities were ground zero of the neoliberal obsession. But it wasn’t just teachers unions. It was all unions:

In both the public and private sector, unions were seeking and getting wage increases that had the effect of reducing or eliminating employment opportunities for people who were trying to get a foot on the first run of the ladder.

And it wasn’t just unions that were a problem. It was big-government liberalism as a whole:

Too many liberals . . . refused to criticize their friends in the industrial unions and the civil service who were pulling up the ladder. Thus liberalism was becoming a movement of those who had arrived, who cared more about preserving and expanding their own gains than about helping those in need.

That government jobs are critical for women and African Americans — as Annie Lowrey shows in an excellent recent piece — has long been known in traditional liberal and labor circles.

That it is only recently registered among journalists — who, even when they take the long view, focus almost exclusively, as Lowrey does, on the role of GOP governors in the aughts rather than on these long-term shifts in Democratic Party thinking — tells us something about the break between liberalism and neoliberalism that Chait believes is so fanciful.

Oddly, as soon as Peters was done attacking unions and civil-service jobs for doling out benefits to the few — ignoring all the women and people of color who were increasingly reliant on these instruments for their own advance — he turned around and attacked programs like Social Security and Medicare for doing precisely the opposite: protecting everyone.

Take Social Security. The original purpose was to protect the elderly from need. But, in order to secure and maintain the widest possible support, benefits were paid to rich and poor alike. The catch, of course, is that a lot of money is wasted on people who don’t need it . . .

Another way the practical and the idealistic merge in neoliberal thinking in is our attitude toward income maintenance programs like Social Security, welfare, veterans’ pensions, and unemployment compensation. We want to eliminate duplication and apply a means test to these programs. They would all become one insurance program against need.

As a practical matter, the country can’t afford to spend money on people who don’t need it — my aunt who uses her Social Security check to go to Europe or your brother-in-law who uses his unemployment compensation to finance a trip to Florida. And as liberal idealists, we don’t think the well-off should be getting money from these programs anyway — every cent we can afford should go to helping those really in need.

Kind of like Hillary Clinton criticizing Bernie Sanders for supporting free college education for all on the grounds that Donald Trump’s kids shouldn’t get their education paid for? (And let’s not forget that as recently as the last presidential campaign, the Democratic candidate was more than willing to trumpet his credentials as a cutter of Social Security and Medicare, though thankfully he never entertained the idea of turning them into means-tested programs.)

It’s difficult to make sense of what truly drives this contradiction, whereby one liberalism is criticized for supporting only one segment of the population while another liberalism is criticized for supporting all segments, including the poor.

It could be as simple as the belief that government should work on behalf of only the truly disadvantaged, leaving everyone else to the hands of the market. That that turned out to be a disaster for the truly disadvantaged — with no one besides themselves to speak up on behalf of anti-poverty programs, those programs proved all too easy to eliminate, not by a Republican but by a Democrat — seems not to have much troubled the sleep of neoliberalism.

Indeed, in the current election, it is Hillary Clinton’s support for the 1994 crime bill rather than the 1996 welfare reform bill that has gotten the most attention, even though she proudly stated in her memoir that she not only supported the 1996 bill but rounded up votes for it.

Or perhaps it’s that neoliberals of the Left, like their counterparts on the Right, simply came to believe that the market was for winners, government for losers. Only the poor needed government; everyone else was made for capitalism.

“Risk is indeed the essence of the movement,” declared Peters of his merry band of neoliberal men, and though he had something different in mind when he said that, it’s clear from the rest of his manifesto that the risk-taking entrepreneur really was what made his and his friends’ hearts beat fastest.

Our hero is the risk-taking entrepreneur who creates new jobs and better products. “Americans,” says Bill Bradley, “have to begin to treat risk more as an opportunity and not as a threat.”

Whatever the explanation for this attitude toward government and the poor, it’s clear that we’re still living in the world the neoliberals made.

When Clinton’s main line of attack against Sanders is that his proposals would increase the size of the federal government by 40 percent, when her hawkishness remains an unapologetic part of her campaign, when unions barely register except as an ATM for the Democratic Party, and Wall Street firmly declares itself to be in her camp, we can hear that opening call of Peters — “But we no longer automatically favor unions and big government or oppose the military and big business” — shorn of all awkward hesitation and convoluted formulations, articulated instead in the forthright syntax of common sense and everyday truth.

Perhaps that is why Jonathan Chait cannot tell the difference between liberalism and neoliberalism.